FTTH VAS - Value-added services for FTTH

About

Project for the FTTH Council Europe.

In large parts of the globe, incumbent as well as alternative operators, eventually backed by municipalities and utility companies, are currently in the process of rolling out, or at least considering, FTTH networks. Despite promising market perspectives and the proven impact, either directly on users’ quality of experience or indirectly on society, economy and environment, FTTH penetration rates in Europe are still low compared to other parts of the world, most notably North-America and Asia. Especially in Western Europe, where the broadband penetration is already high, consumer demand for FTTH remains unproven. In general, the number of homes passed is relatively small and commercially available offers have not yet fully convinced potential customers, which seem satisfied with their existing connection, to migrate to fibre. Furthermore, as providers seek to compensate for high investment costs, they often tend to demand higher prices for next-generation network (NGN) subscriptions compared to regular broadband. If the perceived utility for end-users is not in access prices, we believe it might be in the supply of value-added services (or ‘killer applications’). Indeed, FTTH stimulates the provision of innovative high-bandwidth applications and allows users to benefit from new services for teleworking, e-learning, healthcare, etc.

Cities and regions pioneering in developing NGNs often do so with the adage ‘if you build it, they will come’ in mind. This push strategy, implying that supply comes first and that it automatically evokes demand, is often applied when launching innovative products or services. This viewpoint makes sense for public players since it counters the traditional chicken and egg problem; the availability of high-capacity applications necessitates improved network infrastructure, while investments in upgrading infrastructure may stimulate the development of capacity-requiring applications. Regions deploying NGNs believe they can resolve the abovementioned chicken and egg problem by securing the supply-side of this equation. They assume that the provisioning and consumption of bandwidth-intensive services and applications will automatically develop as a simple consequence of supplying the infrastructure. This reasoning is a very technology-deterministic stance and similar past technology-push introductions have revealed that this argumentation does not always hold. They have proven that users are only willing to adopt new technology if it provides them with perceived added value and benefits and that an innovation’s mere technological excellence is hardly ever decisive. With regard to fibre networks, Noam postulates that ‘it is common to rush into talk of technology or roll-out strategy without first considering the utility to users. If one builds an oil pipeline one must first be sure that there is an oil supply at one end and demand for it at the other. The economic case for investment in super-broadband must rest on its meeting a demand/price combination that is not satisfied today’. That is exactly where the shoe pinches.

Moreover, research tends to focus on the technological excellence of fibre and on the specific topology that is most advantageous to users from a technological point of view, but this technological excellence does not constitute the main driver for users to switch to fibre. Hence, there is an urgent need for a more user-oriented perspective in which research focuses on the subjective added value that fibre presents according to users, instead of the more objective performance-based benefits according to technologists.

One study, conducted by RVA LLC, partially fills this void by demonstrating that the most common Internet applications used over fibre include downloading and streaming video and game playing. Applications which use grew steadily since 2009 include VoIP for audio, two-way video conferencing and downloading or streaming video to a TV set. Transferring files for remote offsite storage, cloud computing, remote monitoring cameras and participation in a virtual world were less used. In asking which potential fibre services respondents deemed most interesting, RVA derived a list including super resolution HDD, two-way video calling, advanced online college and to a lesser extent 3DTV. Older respondents also valued online face-to-face healthcare. Our services-oriented approach focusing on end-user benefits should supplement the RVA study by exploring expert opinions on promising fibre applications and provide added value to most other studies which are either economic or technical in nature.